Note 15 - Reportable Segments

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

15. Reportable Segments

The Company’s reportable segments are as follows:

● Optical Communications – manufactures carrier network and enterprise network components for the telecommunications industry.

● Display Technologies – manufactures glass substrates for flat panel liquid crystal displays and other high-performance display panels.

● Specialty Materials – manufactures products that provide more than 150 material formulations for glass, glass ceramics and fluoride crystals to meet demand for unique customer needs.

● Environmental Technologies – manufactures ceramic substrates and filters for automotive and diesel applications.

● Life Sciences – manufactures glass and plastic labware, equipment, media, serum and reagents enabling workflow solutions for drug discovery and bioproduction.

All other businesses that do not meet the quantitative threshold for separate reporting have been grouped as “Hemlock and Emerging Growth Businesses”.  The net sales for this group are primarily attributable to Hemlock, which is an operating segment that produces solar and semiconductor products.  The emerging growth businesses primarily consist of Pharmaceutical Technologies (“CPT”), Auto Glass Solutions (“AGS”) and the Emerging Innovations Group (“EIG”), which are also operating segments.  

Financial results for the reportable segments are prepared on a basis consistent with the internal disaggregation of financial information to assist the chief operating decision maker (“CODM”) in making internal operating decisions. A significant portion of segment revenues and expenses are denominated in currencies other than the U.S. dollar. Management believes it is important to understand the impact on core net income of translating these currencies into U.S. dollars.  For segment sales and net income, the Company utilizes constant-currency reporting for Display Technologies, Specialty Materials, Environmental Technologies and Life Sciences segments for the Japanese yen, South Korean won, Chinese yuan, new Taiwan dollar and the euro.  Certain income and expenses are included in the unallocated amounts in the reconciliation of reportable segment net income (loss) to consolidated net income. These include items that are not used by the CODM in evaluating the results of, or in allocating resources to, the segments and include the following:  the impact of translated earnings contracts; acquisition-related costs; discrete tax items and other tax-related adjustments; certain litigation, regulatory and other legal matters; restructuring, impairment losses and other charges and credits; and other non-recurring non-operational items. Although these amounts are excluded from segment results, they are included in reported consolidated results.

Reportable Segments and Hemlock and Emerging Growth Businesses (in millions):

																Hemlock
																and
																Emerging
	Optical			Display			Specialty			Environmental			Life			Growth
	Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total
Three months ended September 30, 2022
Segment net sales	$	1,317		$	686		$	519		$	425		$	312		$	407		$	3,666
Depreciation (1)	$	96		$	151		$	56		$	44		$	23		$	38		$	408
Research, development and engineering expenses (2)	$	60		$	31		$	66		$	25		$	10		$	43		$	235
Income tax provision (3)	$	(50	)	$	(35	)	$	(26	)	$	(23	)	$	(11	)	$	(8	)	$	(153	)
Segment net income (4)	$	183		$	134		$	96		$	87		$	43		$	18		$	561

																Hemlock
																and
																Emerging
	Optical			Display			Specialty			Environmental			Life			Growth
	Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total
Three months ended September 30, 2021
Segment net sales	$	1,131		$	956		$	556		$	385		$	305		$	306		$	3,639
Depreciation (1)	$	58		$	153		$	42		$	34		$	14		$	38		$	339
Research, development and engineering expenses (2)	$	57		$	31		$	49		$	28		$	9		$	44		$	218
Income tax provision (3)	$	(38	)	$	(64	)	$	(28	)	$	(16	)	$	(12	)	$	(1	)	$	(159	)
Segment net income (loss) (4)	$	139		$	247		$	107		$	60		$	45		$	(5	)	$	593

																Hemlock
																and
																Emerging
	Optical			Display			Specialty			Environmental			Life			Growth
	Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total
Nine months ended September 30, 2022
Segment net sales	$	3,828		$	2,523		$	1,497		$	1,190		$	934		$	1,200		$	11,172
Depreciation (1)	$	223		$	453		$	138		$	111		$	53		$	111		$	1,089
Research, development and engineering expenses (2)	$	173		$	92		$	163		$	74		$	28		$	121		$	651
Income tax provision (3)	$	(146	)	$	(157	)	$	(70	)	$	(59	)	$	(32	)	$	(19	)	$	(483	)
Segment net income (4)	$	531		$	598		$	262		$	223		$	122		$	35		$	1,771

																Hemlock
																and
																Emerging
	Optical			Display			Specialty			Environmental			Life			Growth
	Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total
Nine months ended September 30, 2021
Segment net sales	$	3,143		$	2,758		$	1,490		$	1,233		$	917		$	865		$	10,406
Depreciation (1)	$	174		$	450		$	125		$	105		$	40		$	104		$	998
Research, development and engineering expenses (2)	$	160		$	79		$	143		$	84		$	25		$	114		$	605
Income tax (provision) benefit (3)	$	(109	)	$	(184	)	$	(74	)	$	(57	)	$	(39	)	$	10		$	(453	)
Segment net income (loss) (4)	$	398		$	708		$	279		$	215		$	145		$	(44	)	$	1,701

(1)	Depreciation expense for Corning’s reportable segments includes an allocation of depreciation of corporate property not specifically identifiable to a segment.
(2)	Research, development and engineering expenses include direct project spending that is identifiable to a segment.
(3)	Income tax (provision) benefit reflects a tax rate of 21%.
(4)	Many of Corning’s administrative and staff functions are performed on a centralized basis. Where practicable, Corning charges these expenses to segments based upon the extent to which each business uses a centralized function. Other staff functions, such as corporate finance, human resources and legal, are allocated to segments, primarily as a percentage of sales. Expenses that are not allocated to the segments are included in the reconciliation of reportable segment net income (loss) to consolidated net income.

The following table is a reconciliation of net sales of reportable segments to consolidated net sales (in millions):

	Three months ended						Nine months ended
	September 30,						September 30,
	2022			2021			2022			2021
Net sales of reportable segments	$	3,259		$	3,333		$	9,972		$	9,541
Net sales of Hemlock and Emerging Growth Businesses		407			306			1,200			865
Impact of constant currency reporting (1)		(178	)		(24	)		(389	)
Consolidated net sales	$	3,488		$	3,615		$	10,783		$	10,406

⁽¹⁾ This amount represents the impact of foreign currency adjustments primarily in the Display Technologies segment.

The following table is a reconciliation of net income of reportable segments to net income attributable to Corning Incorporated (in millions):

	Three months ended						Nine months ended
	September 30,						September 30,
	2022			2021			2022			2021
Net income of reportable segments	$	543		$	598		$	1,736		$	1,745
Net income (loss) of Hemlock and Emerging Growth Businesses		18			(5	)		35			(44	)
Unallocated amounts:
Impact of constant currency reporting not included in segment net income (loss) (1)		(136	)		(33	)		(319	)		(47	)
(Loss) gain on foreign currency hedges related to translated earnings		(68	)		(13	)		257			262
Translation gain on Japanese yen-denominated debt		84			4			321			127
Litigation, regulatory and other legal matters		(23	)		(3	)		(65	)		(11	)
Research, development, and engineering expenses (2)		(43	)		(34	)		(115	)		(107	)
Amortization of intangibles		(31	)		(32	)		(92	)		(97	)
Interest expense, net		(59	)		(64	)		(180	)		(205	)
Income tax benefit		119			50			103			51
Restructuring, impairment and other charges and credits (3)		(138	)		(40	)		(217	)		(42	)
Gain on sale of a business								53			54
Other corporate items		(58	)		(57	)		(165	)		(267	)
Net income attributable to Corning Incorporated	$	208		$	371		$	1,352		$	1,419

(1)	This amount represents the impact of foreign currency adjustments primarily in the Display Technologies segment.
(2)	Amount does not include research, development, and engineering expense related to restructuring, impairment and other charges and credits.
(3)	Refer to Note 2 (Restructuring, Impairment and Other Charges and Credits) to the consolidated financial statements for additional information on activities.